Penalty wage rates are still justified for non-standard hours work

Its a public holiday today in Australia so I will keep it relatively brief. The fact it is a public holiday and the roads are quiet, many shops are closed, you can hear people working on their houses/gardens, people are walking in family groups around the beach and harbour (Newcastle), and there is a plethora of community and sporting events happening today tells you something. It tells you that public holidays and weekends (when the same sort of activities are observed) are special and quite different to the standard 9 to 5 (8 to 4) working week from Monday to Friday. Why is that important? The reason is that the specialness is largely denied by employer groups who consistently try to get penalty wage rates cut so that their members can more fully exploit their workforces. In many cases, the workers who earn penalty rates are in the lowest pay sectors such as accommodation, hospitality, food, and retail. There is pure greed involved in their on-going demands but also gross inconsistency. Many business groups repeatedly mount challenges to the penalty rates system that Australia has in place to protect workers’ rights. But then when their own ‘conditions’ are threatened by deregulation, they argue that the world will end. Hypocrisy has no bounds when dealing with these characters.

I should say at the outset that, over the years, I have written expert testimony and research reports on a commissioned basis for several trade unions in their defense of the penalty rate system. These cases are heard in Australia’s unique wage tribunal system and determined by a judicial body under usual rules of evidence and cross examination.

The tribunal (currently called Fair Work Australia) sets minimum award conditions that are legally binding on employers across an array of occupations and sectors. Fair Work Australia also sets the minimum wage.

I wrote briefly about that experience in this blog – No joy for Australia’s low paid workers.

I have a commission to provide further evidence in three separate cases (involving three separate award challenges from employer groups) in the coming months.

The pressure from the employers is relentless in this regard and so far they have been largely unsuccessful in their endeavours because their argument always denies the obvious (the specialness of public holidays) and rely on the flawed reasoning that mainstream microeconomic textbooks inflict on students in our universities, which conclude (erroneously) that cutting wages increases employment.

The summary points of why penalty rates are important and should be retained are clear:

1. While perceptions of standard and non-standard working hours have evolved, the overwhelming majority of people still work standard working weeks and require weekends to rest, socialise, play and worship.

This is the ‘specialness’ point made in the introduction.

2. Studies show that extending weekend work compromises these non-work activities and reduces quality of life.

3. Penalty rates ensure that employers can attract staff in non-standard hours under terms that society considers to be reasonable given the required sacrifices involved. There has been no abandonment of long-held cultural and social arrangements with respect to the standard and non-standard work division.

4. The trend to two-income families as mortgage debt has risen to record levels has forced families to compromise some of their traditional leisure time to make ends meet. While casual work provides flexibility for some workers, working non-standard hours in precarious, low-paid and disagreeable working environments becomes a necessity for many given the deficient overall jobs growth. Penalty rates help protect living standards of these low-paid workers.

5. Textbook models that predict employment will grow if wages are cut have no evidential basis. Employment is driven by the strength of spending. Wage cuts reduce income and undermine spending.

6. The Australian Bureau of Statistics – Time Use Survey was misused by employers in the recent penalty rates case. They argued that because an “average” person allocates only small amounts of time per weekend on “social and community interaction” or “recreation and leisure” that more work would not compromise them.

The other time uses (rest, sleep, hygiene, homework, housework, child care, shopping, etc) were ignored in their submission, assumed to be expendable. So no one cleans their house at the weekend, or sleeps, rests, or does their shopping etc.

Further, the “average” is meaningless. For example, the average Australian male spends 34 minutes at the weekend on “sport and outdoor activity” and 7 minutes on “religious activities”.

But each individual has to choose between discrete time allocations across activities at weekends with dichotomised choices. A “footy-loving heathen” will spend all afternoon at the football match, while the church-goer is at the temple.

Time use is indivisible and there is diversity. While all people might attend a sporting event, on “average”, for a small time per weekend, actual spectators at each event spent a large chunk of time there.

Adding extra hours of casual work wipes out the basic social and recreational activity for most people. That sacrifice requires penalties to be paid.

7. Employment decisions by firms are not solely based on costs. Businesses supply output and hire workers in response to sales. Cut income and spending and employment fall.

As evidence, the Restaurant Award was significantly restructured in 2010 and penalty rates were retained. Employment growth and profitability in relevant sectors exposed to these rates continued to grow post 2010. There was no discernible negative impact of the Award change.

The OECD, a long advocate of the views proffered by the employers, has in more recent years recanted in the face of overwhelming evidence that these views are erroneous. In the 2006 Employment Outlook it concluded, after an exhaustive examination of the research literature, that “The level of the minimum wage has no significant direct impact on unemployment” and “Highly centralised wage bargaining significantly reduces unemployment”.

The claim that employment is negatively related to wage rates is tantamount to religious doctrine for mainstream economists.

The link has also been categorically dismissed several times by the Full Bench of the Australian Industrial Relations Commission (the previous name for the wage tribunal in Australia).

The – 1999 Reasons for Decision (Living Wage Claim Dec 384/99 V) – concluded that “the increases we propose to award … will do little or nothing to diminish job prospects”.

The Full Bench in the – 2004 Safety Net Decision – rejected the evidence offered by the economist used by the Employer Groups, that predicted a wage rise would result in a “significant fall in employment”.

In other words, it rejected all the theoretical causality that employers propagate.

8. Many social activities also require people to engage in them together, further reducing flexibility. Adding extra casual weekend work wipes out basic social and recreational activity for most people, even those already engaged in part-time employment at weekends.

There was an interesting article in this weekend’s press from Fairfax economics writer, Peter Martin (April 5, 2015) – This Easter give thanks for penalty rates, they keep us human – that bears on this discussion.

Peter Martin argues that we should “give give thanks for penalty rates” this Easter because “they keep us human”.

His point is advanced by noting the hypocrisy of those who continually demand that the penalty rates are abandoned:

Australians who complain about penalty rates are often not themselves required to work unsociable hours.

These characters might be luxuriating in the Corporate Sponsor’s box at the big football match today (public holiday) provided by their company as they claim there is no longer a meaningful distinction between the standard and non-standard working week. Or perhaps they are out of their yachts with their families.

These are the characters who claim the economy is 24/7 (to use their revolting jargon) while they lay around at weekends with their friends socialising.

Peter Martin considers this amounts to a “class element”:

The people who complain about them are those least likely to be forced to work at night or at weekends. The people who serve those people at night and on weekends are often lower paid (without the penalty rates) and less educated.

Most of the workers who receive penalty rates are low paid and rely on the extra rates to stay above the poverty line.

Peter Martin did a survey of one observation:

Assistant Infrastructure Minister Jamie Briggs told a business audience last year he was unable to dine at his favourite restaurant on New Year’s Eve because penalty rates forced it to close. I phoned his office on Good Friday. He wasn’t there.

Typical.

Peter Martin writes that:

Penalty rates get blamed for almost everything these days, which is odd because they’ve been around for 100 years. The Chamber of Commerce and Industry wants businesses that are closed over Easter to put signs in their windows saying it’s because penalty rates are too high. If they are open it wants them to put signs in their windows saying they are employing fewer staff than they would like because penalty rates are too high. As it tells employers on its website: “There is a poster for either scenario relevant to your business.”

The claim in the restaurants case that I gave evidence to you 2013 was that penalty rates undermine the capacity of cafes to make profit.

I provided evidence from the Australian Bureau of Statistics that profits were booming in that sector prior to the GFC.

Peter Martin notes that “in the past five years spending at restaurants and cafes has climbed 36 per cent. Other retail spending has climbed only 18 per cent. Employment in food service establishments has grown at twice the rate of other employment”.

This is hardly the sort of evidence that the Employer Groups ever want to be confronted with. For them it gets in the road of the religious zeal.

As Peter Martin notes:

When presented with these sorts of facts celebrity chefs and employer representatives change the subject and say that things are different these days – most Australians no longer go to church and the distinction between weekends and the rest of the week is blurring.

The time use argument! See my response above.

And, if you read Peter Martin’s article you will see he falls into the trap of using meaningless averages.

But he does advance other serious arguments for retaining penalty rates.

He notes that with the rising importance of two-income families:

… if one partner works outside standard hours and the other works within them the penalty is real.

The conservatives are always bemoaning the breakdown of the family and the need to promote family values again as a presumed source of social stability.

Meanwhile, they advocate economic policies that undermine the capacity of families to engage together.

The fact is that penalty rates are one of the barriers that protect the rest of us from increased employer exploitation. If we accept that workers who give up the usual leisure times and work at the same rates as any time is reasonable then we will then be compelled to defend things such as the standard working day, holiday pay, equipment and safety allowances, sick pay and the rest of the conditions that make work for a capitalist tolerable.

As Peter Martin says:

It’s to invite employers to roster on all of us at all hours, making co-ordinated leisure and co-ordinated sleep almost impossible.

As the radio commentator for today’s AFL football match coverage just said (I am listening as I type): “there is sport everywhere today”.

If penalty rates go, we are allowing capital to drive wedges into things that we consider to be important as a society.

Easter Monday is a significant day in family life in Australia. Penalty rates recognise that – people who serve us on that day (and days like it) deserve a premium wage.

The hypocrisy of the Employer Groups is exemplified by the response of some employers to the latest deregulation agenda in Australia.

A related Fairfax article (April 4, 2015) – Harper review of competition has deregulation agenda – reports that:

A review of Australia’s competition laws is the first systemic shake-up in 22 years and could lead to a revolution in the way Australians live.

The agenda among other things proposed would:

1. Increase “consumer choice” by “granting new access to goods and services from taxis to books to 24-7 shopping, including pharmaceutical and alcohol sales in non-specialist shops.”

2. “deregulate retail hours, leaving sacred only three days a year: Christmas Day, Good Friday, and the morning of Anzac Day.”

3. Break up the “the highly regulated and protected taxi industry …. which could be a major boon for would-be taxi providers under the online-based Uber alternative. It could also help poorer households afford taxis …”

4. “… dissolve decades-old rules that dictate how many pharmacies can operate in a particular area, and who can operate them … Under existing arrangements, a new pharmacy may not open within 1.5 kilometres or 10 kilometres of an existing pharmacy, depending on the location … The panel considers that the pharmacy ownership and location rules should be removed in the long-term interests of consumers”.

The response from the Pharmacy Guild that represents the owners of pharmacies:

… the review’s recommendations will break a pharmacy regulation model

Yes, it would and that would mean we could buy pharmacy items at any time in supermarkets and other shops rather than have to travel some distance to chemist shops that might or might not be open when you have a headache!

But it is fine to attack the penalty rates of lowly paid workers but not the protected oligopoly profits of capital.

Conclusion

The attack on penalty rates is supported by the conservative media.

The sensationalist Sydney rag – The Daily Telegraph – published an article (April 4, 2015) – Bully tactics: Unionists bullies name and shame small business on Facebook for closing over Easter.

It which argued that if only labour costs were cheaper lots of shops would open over the Easter break and there would be higher employment.

I guess if we introduced slavery and redefined it as employment then business might think they could open.

But they would still face the same constraints as now – there is only so much aggregate (spending) demand.

They claim prices would fall for ‘penalty-rate’ affected services which would stimulate demand.

But if incomes fall then demand is unlikely to rise and hence employment is unlikely to rise. It might be redistributed somewhat but unlikely to rise.

That is enough for today!

(c) Copyright 2015 William Mitchell. All Rights Reserved.